PPP model has to change: Baird

The NSW government will pursue public-private partnerships to build and finance major infrastructure projects despite its multi­million-dollar bailout of the consortium delivering new trains for Sydney’s suburban rail network.

Treasurer
Mike Baird
and Transport Minister
Gladys Berejiklian
confirmed yesterday that the government would spend $175 million in 2018 to stop Reliance Rail, the consortium delivering the next generation of commuter trains for the CityRail network, from being tipped into administration.

Mr Baird said the model of PPPs used by the former Labor government was “broken" but the state needed to work closely with the private sector.

Top advisers to the NSW Coalition have pushed for more private sector involvement in major projects, including hospitals, a new convention centre for Sydney and the state’s biggest infrastructure project, the $8.5 billion North West Rail Link.

Former premier
Nick Greiner
, the chairman of the government’s advisory body Infrastructure NSW, has encouraged the government to consider private sector involvement “at every stage" of the big-ticket rail project.

Ms Berejiklian appeared to rule out a private company running trains on the line in December, when she released a draft proposal under which the private sector would build, maintain and operate the line but give state agency RailCorp access to run the trains.

In a statement to The Australian Financial Review at the time, Ms Berejiklian said: “The trains on the North West Rail Link will be operated by the network operator, RailCorp. “The proposal presented to industry does not include the operation of trains by a separate operator.

“It seeks to maximise the private sector’s involvement in building and maintaining the North West Rail Link infra­structure."

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But yesterday she left open the possibility of an expanded role for the private sector, if it could ensure the line was integrated in the CityRail network to give commuters a seamless trip.

This would be easier for the current operator, RailCorp, to achieve, but Ms Berejiklian said: “We’re looking forward to seeing what industry tells us on their ideas about that."

Mr Baird said yesterday there were “lessons to be learned" from the Reliance Rail project and other failed PPPs as the government developed a new model for engaging with the private sector.

“We’re very happy to share sensible risks," he said.

“Whenever you’re looking at one of these contracts, anything that looks too good to be true is very likely too good to be true and we will be taking that into account as we structure PPPs and arrangements with the private sector going forward."

Mr Baird said the government needed to ensure the types of partnerships used were “in the long-term community interest".

There were examples of successful PPPs around the world and it was “about getting the balance right", he said.

The Reliance Rail rescue package is contingent on lead shareholder Downer EDI, which is responsible for building the trains, delivering the balance of 78 eight-car commuter trains for the state’s ageing fleet by 2014.

To date only six of the train sets have been delivered, with a seventh expected shortly.

The government expects the money to repaid with a commercial return. Mr Baird said private sector investors could emerge after the main risk – delivery of the trains – had been removed. This meant the government might not have to provide funds.